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Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Board Options Exchange, Inc., Relating to Trading Crowd Space Dispute Resolution Procedures

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Information about this document as published in the Federal Register.

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Start Preamble December 4, 2003.

I. Introduction

On October 20, 2003, the Chicago Board Options Exchange, Inc. (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] a proposed rule change to adopt new CBOE Rule 24.21, “Index Crowd Space Dispute Resolution Procedures,” which establishes guidelines and procedures for resolving disputes among CBOE members concerning the ability to occupy a space in an index option trading crowd.

The proposed rule change was published for comment in the Federal Register on October 31, 2003.[3] The Commission received no comments regarding the proposal. This order approves the proposed rule change.

II. Discussion

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. Specifically, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act,[4] which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.[5] The proposal is also consistent with Section 6(b)(4) of the Act,[6] which requires, among other things, the equitable allocation of reasonable dues, fees and Start Printed Page 69097other charges among members. The Commission believes that the procedures established by the proposal are designed to provide a fair and impartial process for resolving trading crowd space disputes among CBOE members. According to the CBOE, the recent increase in trading volume and size of trading crowds for certain index options has created a lack of trading spots in certain trading pits.[7] The proposal permits any CBOE member to request the CBOE's assistance in resolving an index option trading crowd space dispute.[8] The proposal is designed to encourage mediated resolutions by requiring the parties to a trading crowd space dispute to cooperate with the Chairman of the FPC in his efforts to mediate before they may request a hearing. In addition, the Hearing Fee, which escalates under certain circumstances set forth in CBOE Rule 24.21(e), should further encourage parties to resolve trading crowd space disputes through mediation rather than through the hearing process.

If a dispute is not resolved through mediation, a CBOE member may request a hearing. The Commission believes that the proposal establishes procedures for selecting impartial Hearing Panels and that the written guidelines in CBOE Rule 24.21(j) should provide the Hearing Panels with guidance in rendering decisions. In addition, the Commission notes that any party may appeal the decision of a Hearing Panel under Chapter XIX of the CBOE's rules.

III. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[9] that the proposed rule change (SR-CBOE-2003-36) is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See Securities Exchange Act Release No. 48702 (October 27, 2003), 68 FR 62122.

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5.  In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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7.  The proposal will apply only to CBOE members who trade OEX, SPX, DJX, and DIA options on the floor of the CBOE or who trade any other index options not located at a station shared with equity options, as determined by the appropriate floor procedure Committee (“FPC”).

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[FR Doc. 03-30702 Filed 12-10-03; 8:45 am]